Comcast reported strong fourth quarter results Wednesday, with broadband fueling growth in its cable business as video continues to take a back seat.
Overall, revenue for Comcast’s cable business grew 5.2 percent to $14.12 billion. Comcast added 351,000 net broadband customers in Q4, including 323,000 residential additions, which drove high-speed internet revenue up 10.1 percent year over year to $4.4 billion.
Comcast is still losing pay TV subscribers—29,000 for the quarter—but the loss was better than analysts’ expectations. Declining at a rate of 1.7 year over year, Comcast’s video base is also shrinking by less than half the decline rate of traditional pay TV overall, which says something about the speed of video losses at satellite providers DirecTV and Dish Network, according to a Wednesday research note by MoffettNathanson analyst Craig Moffett. Video revenue was down 1.6 percent to $5.57 billion.
“Still, with video shrinking and broadband growing, Comcast is organically pivoting away from video with little or no disruption to the business,” Moffett wrote. “Put simply, video matters less and less.”
Comcast grew total customer relationships by 258,000 to 30.3 million at the end of the fourth quarter. The company added 2,000 net voice customers and its automation customer base grew by 39,000.
The company said that at the end of the period 67.6 percent of residential customers take at least two Xfinity products.
Business service revenues were up 9.5 percent to $1.8 billion, and advertising revenue increased 3.1 percent excluding political advertising. Adjusted EBITDA for the cable business was up 7.3 percent to $5.8 billion.
There has been negativity about the cable industry related to video losses, transition to OTT and less valuable skinny bundles, but looking at Comcast’s cable numbers, including revenue growth, EBITDA growth and expanded margins, Moffett argues that cable market valuations are too low.
“Forgive us for wondering aloud why the market thinks Cable is somehow a doomed business,” Moffett wrote. “It’s hard to imagine a better testimony to the strength and resilience of the Cable model.”
Comcast’s NBCUniversal business also reported strong results, with revenue up 7.1 percent to $9.39 billion. Cable networks revenue was up 8.9 percent to $2.89 billion, driven by a 10.3 percent jump in distribution revenue related to contract rate increases and a 28.4 percent increase in content licensing and other revenue. Broadcast TV revenues grew 3.7 percent to $3 billion, including an 18.5 percent increase in distribution and other revenues from higher retransmission consent fees.
Filmed Entertainment revenue was $2 billion for the fourth quarter and Theme Parks revenue rose 3.5 percent to $1.5 billion.
Consolidated revenue for the quarter was up 26.1 percent to $27.84 billion.
MoffettNathanson analysts said Comcast has been the most vexing stock in the firm’s media and telecom coverage as they can see both the bear case and the bull case, but concluded that the conglomerate “is getting easier to like.”
In a statement Brian Roberts, chairman and CEO of Comcast, said, “2018 was a successful and pivotal year for Comcast. I’m pleased with the strong operational and financial results that we delivered across the company. Highlighting a few of our accomplishments during the past year, Comcast Cable’s customer relationship growth accelerated, driven by our 13th consecutive year of over 1 million broadband net additions. 2018 Cable EBITDA growth was the highest in seven years, underscoring the financially attractive transition of our business to connectivity. NBCUniversal had a great year, fueled by double-digit growth in our TV businesses, reflecting our terrific broadcasts of big events like the NFL’s Super Bowl LII, the 2018 Olympics, and the FIFA World Cup, and overall robust demand for our leading sports, news and entertainment content. We truly became a global company with our acquisition of Sky, and are excited about its future and the potential of our combined company in 2019 and beyond. Comcast’s track record of consistent financial performance and our confidence in our outlook for continued, profitable growth is what underpins our announcement of a 10% increase in our dividend in 2019, our 11th consecutive annual increase.”